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Rate Relief Law Alters Power Purchasing in Illinois

September 19, 2013

The Illinois Electric Service Customer Choice and
Rate Relief Law has generated substantial savings for power customers
throughout Illinois and municipalities are increasingly utilizing aggregation
programs to secure savings for residents and businesses.

In 1997, the Illinois General Assembly adopted the
Rate Relief Law, 220 ILCS 5/16 - 101 et seq., which restructured the energy
industry to allow competition among Illinois electricity suppliers. Today, alternative retail electric suppliers
(“ARES”) supply more than half of the electricity purchased by commercial and
industrial customers in Illinois. This
is due in part to municipal aggregation in which local governments purchase
power in bulk from ARES for their residents and eligible businesses.

Financial savings from municipal aggregation can be
significant but are not guaranteed.
Under the Rate Relief Law, municipalities may negotiate bulk rates with
ARES. In contrast, the Illinois Power
Agency sets electricity rates for Ameren and ComEd, whereas ARES purchase power
in the open electricity market often at much lower rates. Notably, electrical cooperatives and
municipal utility customers are exempt from the Rate Relief Law.

Municipal aggregation can impact 50 to 75 percent of
a typical electricity bill. The
remainder is comprised of transmission and distribution charges from ComEd or
Ameren Illinois. Nevertheless, discounted
electricity prices from ARES can produce a large reduction in electricity
bills. Residents and eligible businesses
should examine kWh prices, rate structure (variable versus fixed), contract
length and early termination fees before switching from their current provider.

Municipalities can establish either “opt-in” or
“opt-out” aggregation programs under the the Illinois Power Agency Act, 20 ILCS
3855/1-92 et seq. With referendum
approval, local governments may adopt an opt-out resolution, which provides for
automatic enrollment but permits residents and small businesses to decline
participation without penalty.
Alternatively, an opt-in program requires eligible customers to submit a
request to be included in the program.
These programs typically have one to three-year terms.